EIP-1559

What Is EIP-1559?

The EIP-1559 upgrade helped improve fee predictability and reduce volatility. It also introduced a deflationary mechanism to the supply of ether (ETH).

How Does EIP-1559 Work?

Base fee mechanism

The base fee is determined by the protocol and fluctuates depending on network usage. When the network is busy, the base fee increases; when demand decreases, the base fee drops. This adaptive pricing helps smooth out gas price volatility and results in more predictable transaction costs.

Fee burning

Priority fee (tip)

Even though the base fee gets burned, users can add a small extra amount called a priority fee or “tip” to encourage validators to speed up their transactions. This tip is optional and is paid on top of the base fee. It goes straight to the validator who includes the transaction in a block. This way, users can get their transactions processed faster when the network is busy, and validators still receive rewards for their work.

Conclusion

EIP-1559 made some important updates to how Ethereum deals with transaction fees. It introduced a base fee that goes up or down depending on how busy the network is. This base fee gets burned, which means some ETH is removed from circulation, helping to reduce the total supply. 

Users can also add a tip to pay validators extra if they want their transactions to be processed faster. This way, validators still earn rewards, and users have more control over how quickly their transactions go through.